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Mutual Fund Investment, prominently a financial structure, where people invest money for a certain period, to generate good returns and create a big corpus to assist their big dreams financially.
Several people are investing in different schemes of mutual funds. However still people who don’t invest in mutual funds have a lot of questions regarding investment and creating big wealth from mutual funds.
Here today, we are dealing with one of the FAQs (Frequently Asked Questions) about Mutual Fund Investing!
FAQ:
I am 30 years old and want to build a corpus of ₹30 lakh in six years. I can invest ₹20,000 in equity mutual funds through systematic investment plans (SIPs). Please suggest schemes.
ANSWER:
Well, to create a wealth of Rs 30 lakhs in 6 years by investing Rs 20,000 per month, you would your investments to register an annualized return of 23%. There’s no doubt that equity funds have performed so well in the last year, instead of all this, it would be a foolish decision to expect such bullish market conditions to continue for years.
Experts suggest if you are investing in equity funds for the long term, the optimal return expectation must be 12% or around. As per them, 12% is a more realistic annualized return. And if you invest Rs 20,000 per month via SIP in equity funds for long 6 years with a return expectation of 12%, your corpus created will be equal to Rs 21 lakh.
You must know that by making a bit change to your investing pattern you can create Rs 30 in lakh in 6 years by investing Rs 20,000 per month in mutual funds, what you need to add to your investing strategy is the Step-Up SIP way of investment.
Yes, when you invest via static SIP, that is Rs 20,000 per month in equity mutual funds for long 6 years with a 12% return expectation, you will end up accumulating Rs 21 lakhs.
However, if you invest via Step-Up SIP, in mutual funds, with the same amount, in the same period that is 6 years, and with the same return expectation that is 12%, you can create a corpus of Rs 30 lakh. Let us know how!
When you invest via Step-Up SIP, you are required to increase your SIP amount, annually by a fixed percentage. So, in this scenario, if you start investing with Rs 20,000 initially and increase your SIP amount annually by 15%, with the expected return of 12% you can create a corpus of Rs 30 lakh in 6 years.
Below is a picture depicting your investment details:
#note: the return shown in the figure are calculated returns and not the actual. Actual returns may vary with volatility in the market.
Top-Up SIP or Step-Up SIP………..
Many fund houses allow you to increase your SIP amount by a fixed percentage at fixed intervals, mostly annually. You always have an option to increase the amount of SIP periodically with the top-up or step-up facility in an ongoing SIP.
With time we all get a raise in salary and with raise, we get two options to choose from either we can increase our spending or saving. For a secure future, one must choose wisely and increase their saving or say investment.
The question here is how do you do that in an ongoing SIP? So, let us know how you do it.
How to step up your SIP?
There is two way in which you can do so –
- After deciding how must extra you want to invest you can start afresh SIP, either in the same fund or can start investing in new funds in the same folio. Even you start investing in the same fund your new investment won’t get clubbed with the old one.
- Or, you can use a step-up feature of SIP, with this your contribution will increase automatically according to the pre-decided amount and pre-decided periodicity. This feature covers your investment according to the increase in your disposable income. This top-up option must be specified by the investor while enrolling for the SIP facility.
You can contact your fund manager or can visit Ashutosh Securities Pvt. Ltd. for any assistance in the step-up of SIP.
Keep reading our article and stay updated with the latest news about Mutual Funds!
For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).